Collusion and Price Fixing — Part 2: Class A Fines and Punishment

In Part 1 of this series we described recently enacted Bill 8-26 that prohibits the use of algorithms for establishing rents. Read that post to get an idea of how effective, or ineffective, this legislation will be in reducing our county’s housing costs.

The bill’s language classifies violations of the act as Class A. Each violation, and each day of a violation, is a separate Class A offense.

The lucky owner of the North Bethesda Market off Rockville Pike has 399 apartments in the complex. Using algorithmic pricing on all those apartments for 30 days results in 11,970 Class A violations.

(The bill’s language isn’t 100% waterproof. Does one day’s violation cover all 399 apartments, so the owner is looking at only 399 Class A violations? It’s also not clear if the violation is criminal or civil. Compassion would indicate civil.)

The County’s charter specifies the following punishment for a Class A violation:

For 11,970 Class A violations, the owner is looking at a fine of $6 million, possibly more if each day’s violation is considered a repeat offense. At $500/apartment/day, Bill 8-26 removes any incentive to engage in algorithmic price fixing. No software will result in a $500/day markup.

This brings up the matter of fines. When a landlord engages in price fixing, the injured party is the renter, not the county. Why should the county benefit from someone’s unethical behavior? The county is not injured by the higher rents. Actually, the county benefits from the higher rents in the form of higher taxable income.

If we are fining landlords for what could possibly amount to $50/month incremental rate increase due to price fixing, we should be fining MCPS which costs each of us far more than $50/month in electric buses, spooky warehouse leases, boundary studies, lawsuits, unionized employees receiving $2,500 tax credits, layers and layers of administration, and so much more.

Lastly, if the county government is so allergic to price fixing in rental housing, then it should fine itself tenfold for practices that increase the cost of housing: zoning, address-based school assignments, and operating a golf course inside the Beltway. Those practices cost renters far more than algorithms.

Related posts:

Collusion and Price Fixing — Part 1: Landlords, Rent Control, or MCPS? A MoCo Developer’s Solution for Affordable Housing MoCo’s housing isn’t dirt cheap, but it’s close (Part 2)